Ultra-fast broadband seen boosting demand for in-car connectivity

The adoption worldwide of a new standard for high-speed data for mobile phones and other devices – 4G LTE – is expected to increase dramatically the demand for in-car connectivity.

"LTE in cars is a real game-changer," Markus Dietz, project manager for BMW's LTE development team, told Automotive News Europe. He said the new technology's main selling point is that it will offer in-car Internet connections that can be even faster than the high-speed connections currently available in most homes and offices.

When 3G was introduced a decade ago it paved the way for a number of in-car applications, especially navigation systems, yet lacked the bandwidth required for many data-intensive infotainment apps, such as video-on-demand. But 4G LTE, which is up to 10 times faster than 3G, will allow carmakers to offer apps that, until now, could only be used via DSL and cable connections.

"Cellular technologies such as 2G and 3G are adequate in providing the traditional navigation and emergency calling applications typically associated with a connected car," Josh Builta, an analyst for IHS Automotive, said. "However, LTE can deliver infotainment types of applications far better than these older technologies." IHS Automotive forecasts that the number of LTE-connected cars will grow to 16 million worldwide by 2017.

More in-car options

LTE is expected to improve significantly in-car e-mail access, Internet connections, weather and traffic updates, video-conferencing and video streaming. The bandwidth can also be shared through in-car devices that serve as WiFi hotspots, allowing several users in the vehicle to access the Internet via laptops, tablets or smartphones. The increased download speed improves access to a range of existing services of use to a motorist, such as Google Earth and Web-based services such as Facebook and Twitter.

In-car LTE connectivity is provided in two ways. One requires users to insert an LTE-enabled SIM card directly into an in-car module, which connects externally via an antenna embedded in the vehicle. The second requires users to attach their own LTE-enabled smartphone to the module. Both approaches may be made available in the same vehicle, as BMW is currently doing.

Europe in the lead

Europe will adopt 4G LTE significantly faster than the United States, mainly because of differences in licensing agreements. In Europe, carmakers can accommodate LTE-enabled mobile phones from any telecom provider. But in the United States they have to enter into licensing agreements with each signal carrier. As BMW's Dietz explained: "We don't have a launch date for the United States yet, since you have to have approval for each network. This makes it all very complicated. We are still in discussions about how we can offer LTE in this market."

Within Europe, German luxury carmakers are leading the way by introducing the first 4G LTE-compatible production models in high volumes. Volkswagen Group premium brand Audi began to offer an LTE-connectivity option in its S3 Sportback in July and plans to offer the option in A3 models in Europe in November and in the United States next year.

Although Mercedes has not yet disclosed any details about its embedded LTE plans, a company spokeswoman said customers can already connect their LTE-enabled smartphones to Mercedes' existing infotainment system through the instrument panel console. Mercedes will have a more ambitious LTE offering in the middle of 2014.

Earlier this year, BMW began to offer an optional LTE WiFi hotspot module for all its cars across Europe. The module is activated either through an LTE-enabled SIM card or an LTE smartphone. The module can even be removed from the car and used as a WiFi hotspot elsewhere. BMW also plans to offer an embedded LTE system in 2015, but has not yet provided details.

What price?

With a new generation of infotainment applications forecast to debut in the near future, automakers hope customers will be willing to pay for future "must-have" apps that require in-car LTE connections. General Motors, BMW and Audi have said they expect to offer LTE-enabled data-intensive applications that could serve as potential revenue sources. GM CEO Dan Akerson, for example, told analysts earlier this year that he expects customers will be willing to pay a higher premium for more advanced OnStar services and that an LTE connection might allow for advertising in the vehicle as well as live-streaming media.

While the increased download speed of 4G LTE clearly opens up a range of new possibilities, more work is needed to identify precisely which business models will work for automakers and car buyers. Carmakers may seek an up-front fee for LTE connectivity and applications when a car is purchased to limit monthly subscription charges. In the past, GM has struggled with renewal rates for its OnStar service when the first year of free service comes to an end, Builta of IHS Automotive said. "Paying a monthly bill for LTE is not something consumers will necessarily want to do," he said. "Automakers will need to find the right price point for LTE infotainment and decide whether they want to offer them by way of a subscription model or as a one-off payment when customers make a car purchase."

But the range of apps carmakers can provide may be restricted by legislation now being considered by lawmakers in both the United States and the EU. They are concerned about the potential distraction to drivers of some interactive infotainment apps, for example. "Driver safety has to be kept in mind and there will be drawbacks with some of the applications because of that," Builta said. "So will carmakers still be able to offer something that customers will be willing to pay extra for? That remains to be seen.